Structural reforms play a significant role in promoting a country’s economic growth. These economic reforms increase the economy’s flexibility by raising productivity, encouraging job creation, investment, and efficiency in producing goods and services, ultimately making a country more resilient to economic shocks. Therefore, such reforms boost the economy’s competitiveness, growth potential and adjustment capacity.
After a strong economic rebound in fiscal year (FY) 2021, Pakistan’s economic growth is expected to moderate to 4% in FY2022 due to applied structural reforms (tighter fiscal and monetary policies) before picking up again in FY2023. These applied measures aim to reduce the current account deficit, raise international reserves, and cut inflation. As a result, growth is expected to accelerate to 4.5% in FY2023 due to stronger private consumption and investment.
Pakistan’s economy is recovering steadily due to the pandemic’s well-coordinated fiscal and monetary responses. Such steps led to a remarkable expansion in the industry and services sectors. It is a significant step to continue structural reforms and appropriate fiscal and monetary policies to contain rising inflation and external imbalances. Extensive tax policy and administration reforms are also important to boost revenues to fund essential public services.
Currently, the inflation rate increased from 8.9% in FY2021 to 11% in FY2022 due to significant currency depreciation, higher international energy prices, and elevated global food prices from supply disruptions. However, such inflationary pressure will be expected to drop to 8.5 % in Fy2023 due to fiscal consolidation progression and stabilisation in oil and commodity prices.
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